US business groups alarmed over China's new ‘intrusive’ cybersecurity regulations

US business groups have sounded the alarm over China’s new cybersecurity rules, adopted amid Snowden leaks. They say the rules are intrusive, require tech companies to disclose sensitive intellectual property, and create backdoors for Chinese authorities.

The American Chamber of Commerce in China and 17 other US
business lobbies addressed a letter to the Central Leading Small
Group for Cyberspace Affairs, led by Chinese President Xi
Jinping, on Wednesday. In the letter, the business groups called
on the Chinese government to take part in “urgent discussion
and dialogue” over the new cybersecurity regulations.

The new Chinese rules impose tight security checks that would
force tech companies to disclose sensitive intellectual property,
the US lobby groups said.

Beijing adopted the new regulations requiring tech companies –
including giants such as Cisco and Microsoft, which sell
technologies to Chinese banks to unveil secret source code – to
submit to invasive audits and build backdoors into hardware and
software, The New York Times reported on Wednesday.

Thus, tech companies that cooperate with Chinese banks will have
to set up research and development centers in the country, get
permits for workers who service technology equipment, and build
"ports" which let Beijing manage and monitor hardware data,
Reuters reported. Under the regulations, software providers will
also have to adopt Chinese encryption algorithms so that Beijing
can monitor financial activities.

The 22-page document was approved at the end of 2014 and comes
within the framework of a broader cybersecurity policy, the
details of which are yet to be unveiled.

Cybersecurity has become a sensitive issue between the two
states, following leaks from National Security Agency (NSA)
contractor Edward Snowden on US international spy programs that
targeted a number of Chinese institutions.

In May 2014, China called on banks to stop using IBM servers and
replace them with locally made machines, amid fears that the
nation’s financial security might be compromised.

At the same time, Chinese companies said they would cease working
with US consulting firms such as McKinsey, BCG, Bain &
Company, and Strategy& (formerly Booz & Co.), over fears
that they are spying on behalf of the US government.

Microsoft also became entangled in a Chinese government probe in
May 2014, over corruption and alleged breaches in anti-monopoly
laws.